Gujarat High Court: Belated Allegation of Coercion Cannot Justify GST Refund After Voluntary Payment During Search

In a significant ruling on GST search proceedings and voluntary tax payments, the Gujarat High Court has held that a taxpayer cannot seek a refund of GST, interest, and penalty voluntarily paid during a search by alleging coercion nearly two years later. The Court observed that such a delayed allegation is merely an afterthought intended to recover the amount already paid.

The judgment clarifies that voluntary payments made during GST investigations cannot be withdrawn through refund proceedings unless the taxpayer establishes that the tax was not legally payable or that an excess amount was paid. The Court also ruled that the delayed issuance of Form GST DRC-04 does not invalidate the proceedings, as the GST Rules do not prescribe any specific time limit for issuing the acknowledgment.

Background of the Case

The case arose from a writ petition filed by the proprietor of Alpha-1 Tuition Classes and Hostel, who challenged the rejection of his refund application under Section 54 of the Gujarat Goods and Services Tax Act, 2017.

The petitioner sought a refund of approximately ₹1.96 crore, comprising GST, interest, and penalty, claiming that the amount had been recovered under pressure during a search conducted by the GST department.

The search was carried out between 6 October 2023 and 10 October 2023, during which GST officials seized relevant documents, recorded statements, and accepted payment from the petitioner through a temporary GST registration.

Nearly two years after making the payment, the petitioner filed a refund application alleging that the tax authorities had compelled him to deposit the amount through threats and coercion during the search proceedings.

Petitioner’s Arguments

The petitioner primarily argued that the payment was not voluntary but was extracted under duress by GST officials.

He further contended that:

• The department rejected the refund application without initiating adjudication proceedings under Sections 73 or 74 of the Gujarat GST Act, which govern the determination of unpaid or short-paid tax.
• Form GST DRC-04, acknowledging the voluntary payment, was issued almost two years after the payment, making the entire process legally unsustainable.
• Since no adjudication proceedings were initiated, the department could not retain the amount collected during the search.

Based on these submissions, the petitioner requested the Court to direct the refund of the entire amount paid.

GST Department’s Stand

The State strongly opposed the petition and submitted that the payment had been made voluntarily.

According to the department:

• The search records, panchnamas, and statements clearly established that the petitioner admitted collecting tuition fees partly in cash without obtaining GST registration.
• The petitioner himself accepted the quantified tax liability during the search.
• A temporary GST registration was obtained at the petitioner’s own request solely for making the payment.
• At no point during or immediately after the search did the petitioner allege coercion or intimidation.
• The allegation of force surfaced only when the refund application was filed nearly two years later, demonstrating that it was merely an afterthought.

Gujarat High Court’s Findings

After examining the records, the Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati found no merit in the petitioner’s allegations.

The Court observed that the statements recorded during the search clearly showed that the petitioner had voluntarily admitted his tax liability and specifically declared that his statement was being made without any pressure, threat, or coercion.

The Bench held that these contemporaneous records completely contradicted the petitioner’s later allegations.

The Court noted that the conduct of the petitioner throughout the search proceedings demonstrated voluntary cooperation with the authorities and that the subsequent claim of coercion had been raised solely to obtain a refund.

Delay in Issuing Form GST DRC-04 Not Fatal

One of the important issues before the Court was whether the delayed issuance of Form GST DRC-04 rendered the proceedings invalid.

Rejecting the petitioner’s argument, the Court held that Form GST DRC-04 is merely an acknowledgment of voluntary payment made under Rule 142 of the GST Rules.

The Court clarified that neither the CGST Rules nor the Gujarat GST Rules prescribe any statutory time limit for issuing the acknowledgment. Therefore, the delay in issuing Form GST DRC-04 could not invalidate an otherwise lawful voluntary payment.

Refund Under Section 54 Not Available in Such Cases

The High Court also explained the scope of Section 54 of the GST Act, which governs refund claims.

According to the Court, a refund can be granted only where:

• the tax was not legally payable; or
• the taxpayer has paid an amount in excess of what was actually due.

In the present case, the petitioner had voluntarily admitted his liability and discharged the tax dues during the search. Therefore, he could not invoke Section 54 merely by making a delayed allegation of coercion without producing any convincing evidence.

The Court further observed that if the petitioner was aggrieved by the rejection of the refund application, he ought to have availed the statutory appellate remedy under Section 107 of the GST Act instead of directly approaching the High Court through a writ petition.

Conclusion

The Gujarat High Court ultimately dismissed the writ petition and upheld the rejection of the refund claim.

This judgment reinforces an important principle under GST law: a taxpayer who voluntarily admits tax liability and deposits GST during search proceedings cannot subsequently seek a refund by raising an unsubstantiated allegation of coercion after a considerable delay. The ruling also clarifies that the delayed issuance of Form GST DRC-04 does not affect the legality of voluntary tax payments, as the GST Rules prescribe no mandatory timeline for issuing the acknowledgment.

Case Details

Court: Gujarat High Court

Decision Date: 25 June 2026